Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

In re Sony Corp. SXRD Rear Projection Television Marketing

July 22, 2010

IN RE: SONY CORP. SXRD REAR PROJECTION TELEVISION MARKETING, SALES PRACTICES AND PRODUCTS LIABILITY LITIGATION


The opinion of the court was delivered by: Robert P. Patterson, Jr., U.S.D.J.

OPINION AND ORDER

On May 21, 2010, the Court ordered Counsel for the plaintiffs in Meserole, et al. v. Sony Corp., et al.,*fn1 Milberg LLP, by Leigh Smith, Sanford Dumain and Jennifer Czeisler, Lax LLP, by Robert Lax, and Lange & Koncius LLP, by Joseph Lange and Jeffrey Koncius (hereinafter "Counsel for the Meserole Plaintiffs"), to show cause why certain statements contained in the Second Amended Complaint and made on the record do not constitute violations of Rule 11 of the Federal Rules of Civil Procedure. At issue here are statements purportedly from two confidential sources, quoted in a complaint filed with the court and emphasized at oral argument, that if accurate would be relevant to Plaintiffs' claims of consumer fraud due to Sony's knowledge, alleged therein, of defects in certain models of televisions at issue in this litigation, manufactured by Sony, and sold to consumers. Because of these statements by Counsel for the Meserole Plaintiffs, the Court, before determining potentially dispositive motions to dismiss, ordered on December 23, 2009 that the depositions of the confidential sources be taken by counsel.

At confirmatory depositions, both confidential sources directly contradicted the statements attributed to them. Because Counsel for the Meserole Plaintiffs made objectively unreasonable representations in pleadings submitted to the Court, orally in presentations to the Court, and in motion papers without making a sufficient or appropriate investigation as to the truth of such statements, Milberg LLP, Leigh Smith, Sanford Dumain, Jennifer Czeisler, Lax LLP, Robert Lax, Lange & Koncius LLP, Joseph Lange, and Jeffrey Koncius are reprimanded.

I. Facts and Proceedings

In October 2008, Paul Meserole commenced the first of the class actions, subsequently consolidated by the Panel for Multidistrict Litigation with four other class action complaints filed by the same counsel and two other class action complaints filed by separate counsel, concerning defective optical blocks in the same models of television sets manufactured and sold by Sony. While not immediately apparent to the purchaser, the defects allegedly caused various color anomalies and discolorations to manifest themselves over time that "severely interfere with the program display." (Compl. ¶ 3.) The Complaint concerned the second generation of SXRD rear projection television sets, the first generation of which had been the subject of an earlier lawsuit, consolidated and heard in this Court, In Re: Sony SXRD Rear Projection Television Class Action Litigation, 06-cv-5173 (RPP), in which the class was represented by class counsel, some of whom now serve as attorneys for the Meserole Plaintiffs.

A First Amended Complaint ("FAC") in Meserole was filed on December 5, 2008, and in January 2009, the Defendants moved to dismiss the FAC. Neither the Original Complaint nor the FAC contained allegations by confidential sources. In an opinion issued on May 19, 2009, the Court granted the Defendants' motion to dismiss in full and dismissed the FAC without prejudice to repleading. The Court dismissed the claims sounding in fraud in part because the FAC failed to "put forth any particularized allegations evincing that Sony knew about the alleged defect prior to distributing the products to Plaintiffs." Meserole v. Sony Corp. of Am., No. 08-cv-8987, 2009 WL 1403933, at *4 (S.D.N.Y. May 19, 2009).

On June 17, 2009, Counsel for the Meserole Plaintiffs filed the Second Amended Complaint ("SAC"), containing allegations attributed to two former employees of Sony ("confidential sources"). They filed a nearly identical Consolidated Amended Class Action Complaint superseding the original complaints filed in several of the related cases on October 15, 2009 -- although this opinion refers primarily to the SAC, all allegations about the confidential sources are repeated in identical form in the Consolidated Amended Class Action Complaint filed by the same counsel.

A. Representations to the Court

In the SAC, Counsel for the Meserole Plaintiffs alleged: "As stated by a former Sony factory technician in Sony's manufacturing and assembly facility in Mount Pleasant, Pennsylvania, employed by Sony from 1994-2007 ('Confidential Source #1') with respect to the defect in design of the Optical Block contained in the Televisions [defined in the complaints to be models KDS-R60XBR2, KDS-R70XBR2, KDS-50A2000, KDS-55A2000, and KDS-60A2000]: 'Every single television that left the plant was bad and they knew it.'" (SAC ¶ 22 (emphasis in original).) Counsel for the Meserole Plaintiffs have since conceded in their response to the order to show cause that the in-house investigator's notes from which the quotation was taken show that this quotation was taken out of context. In full, the quotation would have read: "In 2005, if Sony sent out one million television sets, they got one million back. Every single television that left that plant was bad and they knew it."*fn2 (Leigh Smith Decl. ¶ 17.) The missing introductory sentence is significant because Sony television sets manufactured in 2005 are not the sets complained of in the SAC or the Consolidated Amended Class Action Complaint, which relate only to models manufactured and sold thereafter. (SAC ¶ 24.)

Counsel for the Meserole Plaintiffs also alleged in the SAC: "a former Sony factory technician in Mount Pleasant, Pennsylvania employed by Sony from 1996-June 2007 ('Confidential Source #2') noted that the Optical Block Defect at Sony was a 'huge' problem, and that, despite its knowledge of the defect, Sony did not re-engineer its Optical Blocks but instead replaced consumers' Optical Blocks with refurbished ones and charged $700 in each instance for the refurbished Optical Blocks used to replace the ones that failed." (SAC ¶ 23.)

At oral argument on the Defendants' motion to dismiss the SAC, held on September 14, 2009, Counsel for the Meserole Plaintiffs repeatedly referenced the allegations in the SAC concerning the confidential sources. Counsel for the Meserole Plaintiffs described these allegations as "prov[ing] that Sony knew that these televisions were all defective before they offered a single one for sale." (Transcript (Sept. 14, 2009) at 13.) Additionally, Counsel for the Meserole Plaintiffs relied upon the allegations about the confidential sources in arguing that "all that Sony is doing -- this is in paragraph 23, citing former employees of Sony -- is that they are using refurbished optical blocks, they are using the same old optical blocks, they are sending them back to Mount Pleasant, refurbishing them, and sending them out into the world where they know they are going to fail." (Id. at 43-44.) In their briefings and oral presentation to the Court, Counsel for the Meserole Plaintiffs relied heavily upon the confidential source allegations to argue to the Court that the SAC was different from the First Amended Complaint, in that it properly alleged the scienter element of the fraud claims.

In a letter to the Court, dated January 4, 2010, Counsel for the Meserole Plaintiffs wrote in advance of the confirmatory discovery, which was scheduled to include depositions of both confidential sources: "The Confidential Sources are prepared to give deposition testimony later this month regarding the defect plaintiffs allege is inherent in Sony's XBR2 televisions, Sony's inability to correct the defect, and Sony's abandonment of further countermeasures to correct the defect."

In their responsive papers to the Court's May 21, 2010 Order to Show Cause, Counsel for the Meserole Plaintiffs aver that the allegations about the confidential sources "were drawn from an investigation that included interviews of former employees and other persons with potential knowledge of the issues pertaining to this litigation by an in-house Milberg investigator." (Leigh Smith Decl. ¶ 7.) The in-house investigator prepared three separate investigative memoranda after interviewing the confidential sources and others. (Id. ¶ 15.) Counsel for the Meserole Plaintiffs requested that the Court review the investigative reports in camera because they were subject to the work product privilege. The Court declined to agree to an in camera review of the investigation memoranda, pointing out that Plaintiffs' reliance on the submission of the investigative reports would risk relinquishing Plaintiffs' work product privilege over these and related documents. Counsel for the Meserole Plaintiffs did not thereafter submit the investigator's memoranda to the Court. Rather, in a conclusory declaration attached to the response to the order to show cause and not purporting to be based on personal knowledge, Leigh Smith also declared: (1) the investigator met with Confidential Source #1 repeatedly; (2) Confidential Source #1 confirmed that the optical block problems affected many of the models that are the subjects of this lawsuit; and (3) the investigator's work was supervised by the attorneys. (Id. ¶¶ 18-21.) Counsel for the Meserole Plaintiffs did not submit an affidavit or declaration from the investigator, from any of the other attorneys for the Meserole Plaintiffs, or anyone else.

B. Depositions of the Confidential Sources

The Court's order on December 23, 2009 that the confidential sources be deposed followed the announcement by letter dated November 12, 2009 from counsel for Sony and counsel for one of the other plaintiffs, Sabrina Cardenas, that they had reached a settlement on behalf of the class with the Defendants. Accordingly, the allegations of the confidential sources were relevant not only to the pending motion to dismiss but also to the Court's consideration of the fairness of the proposed settlement. Plaintiff Cardenas was represented by the law firm of Federman & Sherwood, subsequently appointed by the Court on May 19, 2010 as class counsel for a fairness hearing, over the objections of Counsel for the Meserole Plaintiffs.

1. Deposition of Confidential Source #2

On January 28, 2010, counsel for all parties to this litigation were present at the deposition of Confidential Source #2.*fn3 The deponent testified that he had worked for Sony from March of 1996 through June 30, 2007. (Transcript (Jan. 28, 2010) at 5-6.) Confidential Source #2 worked with the models that are the subject of this litigation during his time at Sony. (Id. at 9.) He confirmed that there were substantial problems with the optical blocks in the rear projection televisions, but he was unaware of any of these problem sets ever being sold to consumers. (Id. at 11, 36.) The problems with the optical blocks were primarily about the blocks being contaminated by dirt; Sony fixed the problem by cleaning the blocks, rather than engineering a fix. (Id. at 11-12.) The contamination came from the shipping process. (Id. at 13.) Confidential Source #2 testified that he was aware of no other problems, besides the contamination, with the optical blocks. (Id. at 29.) He also testified that any contamination would be immediately apparent -- from the first time the television was turned on -- and was detected at the inspection stations on the assembly line. (Id. at 30, 34.) He specified that the defects of which he was aware were not the sort that would appear gradually or that became apparent after months of use.*fn4 (Id. at 30-31.) He also testified that the issue was resolved by improving the "standards of packaging before [the optical block] was shipped overseas" from Japan to the Sony assembly plant in Pennsylvania. ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.